AP: Oil-For-Food Probe Finds Mismanagement

By Nick Wadhams
The Washington Post
July 16, 2005
http://www.washingtonpost.com/wp-dyn/content/article/2005/07/16/AR2005071600353.html
UNITED NATIONS -- Investigators probing the U.N. oil-for-food program have found evidence of gross mismanagement and possible corruption by the U.N. agency that oversaw compensation for victims of Iraq's 1990 invasion of Kuwait, Iraq's deputy U.N. ambassador said Friday.
Investigators with the Independent Inquiry Committee had been investigating hundreds of millions of dollars in questionable expenditures by the U.N. Compensation Commission for months. It had denied any wrongdoing.
But Fesial al-Istrabadi told The Associated Press that the investigators found the allegations were legitimate, particularly in how the commission handled currency exchange rates with the Iraqi dinar. It had fluctuated wildly in recent years.
There appear to have been some irregularities that are at the very least gross mismanagement at the level of currency exchange, al-Istrabadi told The Associated Press.
The probe of the U.N. agency is part of a larger line of inquiry by the committee, led by former Federal Reserve Chairman Paul Volcker, into whether several United Nations agencies overcharged Iraq for their work under the oil-for-food program. The committee is considering if the Iraqi government should be compensated.
The agencies helped implement humanitarian operations in Iraq under oil-for-food, a $64 billion program created in 1996 to alleviate the suffering of ordinary Iraqis caused by U.N. sanctions imposed on Iraq after the Kuwait invasion.
The executive director of the probe, Reid Morden, refused to confirm al-Istrabadi's claim but said investigators had long wanted to scrutinize the U.N. Compensation Commission.
It's a program which so far has submitted itself to very little in the way of transparency, Morden said.
U.N. audits released in January had found that the U.N. Compensation Commission overpaid various parties more than $5 billion.
The commission had disputed that, but investigators told al-Istrabadi that there did in fact appear to have been wrongdoing.
The Volcker committee's first interim report, released in February, described a turf war between the internal U.N. watchdog and the commission, which objected to the audits and repeatedly rejected its findings.
U.N. spokeswoman Marie Okabe said the United Nations would have no comment on the latest allegations until the final Volcker report comes out. It is expected in September.
Al-Istrabadi said Iraq had been following reports of corruption and wrongdoing by the commission for some time. He said that included reports of claimants approaching the commission and asking lets say for a dollar and being given two.
The commission, established in 1991, announced in late June that it had approved claims worth $52.2 billion and would take no more. Of that, it has disbursed $19.2 billion so far.
Before the U.S.-led war to topple Saddam Hussein, 25 percent of proceeds from oil-for-food were reserved for compensation. But after the invasion ended and oil-for-food was shut down, the Security Council lowered that to 5 percent of oil sales.
During oil-for-food and after, U.N. agencies repeatedly lamented how difficult it was to do business in Iraq at the time. A major problem were the erratic exchange rates. The fluctuating dinar made it difficult to determine expenses and administrative costs, among many other hurdles.
Al-Istrabadi said Iraq would demand the money be returned to it if mismanagement and corruption were proven. He rejected the argument that the commission had a tough time managing the exchange rates.
That's not much of an excuse, al-Istrabadi said. These are supposed to be sophisticated international operators with real responsibility over real people. If they weren't up to the task, they should have said so.